Do Managers Do Good with Other Peoples' Money?
Dartmouth College - Tuck School of Business
Harrison G. Hong
Princeton University - Department of Economics; National Bureau of Economic Research (NBER)
University of Chicago - Booth School of Business
August 15, 2013
Fama-Miller Working Paper
UCD & CalPERS Sustainability & Finance Symposium 2013
AFA 2013 San Diego Meetings Paper
Chicago Booth Research Paper No. 12-47
We find support for two key predictions of an agency theory of unproductive corporate social responsibility. First, increasing managerial ownership decreases measures of firm goodness. We use the 2003 Dividend Tax Cut to increase after-tax insider ownership. Firms with moderate levels of insider ownership cut goodness by more than firms with low levels (where the tax cut has no effect) and high levels (where agency is less of an issue). Second, increasing monitoring reduces corporate goodness. A regression discontinuity design of close votes around the 50% cut-off finds that passage of shareholder governance proposals leads to slower growth in goodness.
Number of Pages in PDF File: 41
Keywords: corporate social responsibility, agency costs
JEL Classification: G30, G31, G35working papers series
Date posted: November 20, 2011 ; Last revised: September 12, 2013
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